Why You Should Sell Your Goldcorp Inc. and Barrick Gold Corp. Shares and Buy Agnico Eagle Mines Ltd.

Agnico Eagle Mines Ltd. (TSX:AEM)(NYSE:AEM) faces practically no geopolitical risk, something that Barrick Gold Corp. (TSX:ABX)(NYSE:ABX), Goldcorp Inc. (TSX:G)(NYSE:GG), and Eldorado Gold Corp. (TSX:ELD)(NYSE:EGO) surely envy.

| More on:

When you think of large Canadian gold miners worth owning, Agnico Eagle Mines Ltd. (TSX:AEM)(NYSE:AEM) may not be the first to spring to mind. But there’s one big reason why Agnico deserves a lot more attention.

Quite simply, Agnico faces far lower geopolitical risk than its larger peers. And in the world of mining, such an advantage cannot be ignored. After all, natural-resource based companies are stuck wherever their assets are; they cannot simply move to a different country when governments mistreat them.

Below we take a closer look.

Agnico: Not a bad place to be

Let’s take a look at where Agnico mines gold from. About 70% of production comes from Canada, and nearly 10% comes from Finland. The two countries rank sixth and tenth respectively on the Forbes Best Countries for Business list.

The remaining 20% of production comes from Mexico, a country that has been performing very well in recent years. Mexico has also become much more accommodating to business under reform-minded President Enrique Peña Nieto.

And unlike many of Agnico’s larger peers, the company operates in no other countries. This helps in a couple of ways. Not only is there less chance of a geopolitical surprise, but the company is able to concentrate on the areas it knows best. When looking at other Canadian miners, it becomes clear just how significant Agnico’s advantage is.

Eldorado and Barrick: Blindsided

Eldorado Gold Corp. (TSX:ELD)(NYSE:EGO) has been a strong performer for years. It has managed to grow very nicely, all while maintaining a pristine balance sheet. Unfortunately for the company’s investors, Eldorado faces a lot more geopolitical risk than Agnico.

And that came to light in late January, when the left-wing Syriza party won national elections in Greece, where Eldorado is developing a massive gold project. Syriza is dead-set opposed to Eldorado’s mining ambitions in the country, which is not good news for the miner, since Greece accounts for 30% of its reserves.

Barrick Gold Corp. (TSX:ABX)(NYSE:ABX) is facing problems of its own, down in Zambia. There the government raised royalty rates on open-pit mines from 6% to 20% as part of its 2015 budget. In response, Barrick is threatening to shut down its Lumwana copper mine in the country. Thankfully, Lumwana is not as important to Barrick as Greece is to Eldorado. But shareholders are still unhappy.

Goldcorp: Even the best have issues

Goldcorp Inc. (TSX:G)(NYSE:GG) has its own geopolitical issues to deal with. The most significant is in Argentina, where foreign exchange restrictions and high inflation are threatening the Cerro Negro mine, which just started production in July.

Because of these issues, Goldcorp could record an impairment charge of up to US$2.7 billion, a very big number even for a company of Goldcorp’s size.

And when you’re trying to make a bet on gold, are these really the kinds of issues you want to be dealing with? If not, Agnico might be just what you’re looking for.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair has no position in any stocks mentioned.

More on Metals and Mining Stocks

tsx today
Metals and Mining Stocks

TSX Today: What to Watch for in Stocks on Friday, November 25

TSX stocks could remain range bound, as the U.S. markets are set to close early today.

Read more »

stock market
Metals and Mining Stocks

Should You Invest in TSX Mining Stocks Right Now?

A key TSX mining index has gained 16% so far this quarter. Newmont stock (TSX:NGT) could be a rewarding bet…

Read more »

tsx today
Metals and Mining Stocks

TSX Today: What to Watch for in Stocks on Wednesday, November 23

Investors may want to limit their risk exposure ahead of the U.S. Thanksgiving holiday.

Read more »

tsx today
Metals and Mining Stocks

TSX Today: What to Watch for in Stocks on Tuesday, November 22

Volatile oil and metals prices amid surging coronavirus cases in China could drive the commodity-heavy TSX index today.

Read more »

financial freedom sign
Metals and Mining Stocks

Could Investing in Teck Stock Help Make You a Millionaire?

On the surface, Teck (TSX:TECK.B) stock doesn't look all that exciting. But you're going to change your tune after what…

Read more »

Nickel ore is mined from the ground.
Metals and Mining Stocks

2 Mining Stocks That Could Shine With Rising Commodity Prices

Two mining stocks have strong potential to outperform by year-end 2022 and beyond if commodity prices bounce back or rise…

Read more »

tsx today
Metals and Mining Stocks

TSX Today: Why Canadian Stocks Could Fall on Monday, November 14

TSX investors may remain cautious ahead of the Canadian inflation and U.S. retail sales numbers due later this week.

Read more »

A worker wears a hard hat outside a mining operation.
Metals and Mining Stocks

2 Commodity Stocks to Ride Out a Storm

Nutrien (TSX:NTR) and Barrick Gold (TSX:ABX) are juicy commodity plays with huge dividend yields.

Read more »